Real Estate Bill – A Reformation
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Read General Awareness Topic: Real Estate Bill – A Reformation
Though the real estate is not considered as one of the basic industries in India but it is indeed an important industry as it delivers one of the very basic needs of the people of the country i.e. housing.
Other sub sectors of the real estate include commercial development which includes retail, office spaces and hospitality. Rising income, increasing population, rapid urbanization, rural to urban migration, disintegration of joint families and economic growth etc are the major factors fuelling the growth of real estate in all its sub sectors.
According to the report ‘Indian Real Estate – Opening Doors’, prepared by KPMG and National Real Estate Developers Council (NAREDCO), around 10 million people in India migrate from rural to urban areas annually thus anticipating a huge growth potential in this sector. Real estate contributes 9% to the GDP. With more than 11% growth rate, the real estate market in India is expected to reach USD180 billion.
However, despite its potential, significance and role in nation building, the real estate was growing fairly unregulated and many malpractices slipped into the sector leaving mostly the consumer mostly receiving end. In fact, several reports suggest that most of the black money generated in India is parked in real estate thus inflating the cost of many projects. Because of this reason, it became more imminent for the government to introduce a law regulating the real estate sector.
A real estate regulator is more important than any other regulator like telecom regulator (TRAI) or insurance sector (IRDA) because most middle class people often invest all of their hard earned savings to buy a home.
On March 10, 2016, Rajya Sabha, the upper house of the Parliament, passed the much awaited Real Estate Bill and is slated to be passed in the Lok Sabha, the lower house of the Parliament on March 14, 2016. Salient features of the bill are as under –
- The Real Estate bill provides for the establishment of State Real Estate Regulatory Authority (SRERA) in every state of the country. Buyers in respective state can approach the authority for redressal their grievances against any buyer. SRERA will dispose the complaints within 60 days.Any project with more than 500 square meter area or with eight or more apartments needs to be registered with SRERA.
- Builders would have to park 70% of the booking amount of a particular project in a dedicated account. In the past, builders often use the booking amount of a particular project in initiating several other new projects which delays the completion and handing over of original project. This provision will provide big relief to all the prospective buyers as delay in handing over of the projects is most common grievance faced by them.
- If the developer is unable to handover the property in time, the developer would pay some interest.
- Developers would have to share all information related to the project plan, layout, government approvals, land-title status, sub-contractors of the project and completion of the project with the SRERA. Ultimately, this information will be passed to the consumers as well. This clause would introduce the much needed transparency in the sector.
- As the act clearly defines carpet area, it would do away with ambitious concept of super built-up area(flat area plus common area). Super area was often used as a tool to fleece more money from the buyers.
- Developer cannot make any change in the original plan without the consent of the buyer. In can only be done after the consent of two-third of buyers. Charging more money by altering the plans was a common practice with the builders.
- Developer would be responsible for fixing all the structural defects for five years after the handing over of the project. With this, developers will avoid using sub-standard materials.
- Violation of the orders of appellate tribunal will attract the jail term of three years or penalty.
- Those who have already purchased the home but are stuck in the incomplete projects would also be covered under the act.
This bill will indeed provide a structure to the much disorganized real estate sector which was growing haphazardly in accordance with the whims of developers and connivance of government authorities. The transparency and accountability introduced with bill will bring in the much needed regulation.
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